Cash or Accrual Basis Accounting?
💰 Cash basis accounting records entries are based on cash flow, while accrual-basis accounting records are based on revenue and expenses.
💼 Accrual basis accounting allows for more accurate financial statements and helps evaluate expenses associated with revenue.
🏨 Accrual basis accounting is particularly valuable for businesses in the hotel industry.
Cash basis accounting records entries based on when cash comes in and out of the bank, making it simpler and easier for accountants. On the other hand, accrual basis accounting records revenue and expenses based on when they are earned or incurred, even if the cash has not been received or spent yet.
Accrual basis accounting allows for more accurate financial statements and helps in evaluating the expenses associated with each batch of revenue. It also allows for monthly operational financial statements, which can help in making operational decisions and fine-tuning operations. The video suggests that using accrual basis accounting can be more valuable for businesses, especially in the hotel industry.